Most companies eventually face a time when a business setback or economic downturn will leave them with unexpected cash flow problems. These issues are easier to work through if your business has thought in advance about what it will do in such a circumstance and where the money might come from. Having sources of temporary funding intact can help a business survive and even thrive while others falter.

Be Prepared

Lining up sources of temporary funding in advance limits the need to scramble when a crisis hits. That knowledge allows you to form a contingency plan from a position of relative strength. If you already have a line of credit established with your bank, for example, you won’t need to apply for a loan at a time your balance sheet would make that a tough sell.

Stay Afloat

Temporary funding can be a lifesaver for a company relying on a source of funding that occasionally sees brief interruptions, has a lag between completion and remuneration, or carries the threat of a break in payments. A contractor, for example, may experience a gap at the start of a contract between when the initial work is performed and the first payment received. If a business has a contingency plan that includes temporary funding options, it’s better able to bid on such contracts, knowing that it has the resources to augment its cash flow and provide the necessary bridge until the contract revenue starts coming in.

Know Your Options

Determining your source of temporary funding gives you a better sense of how to budget through tough times. If you know you’re going to have to turn to a factoring firm, you’ll have to discount your accounts receivable to include that cost, and budget accordingly. Loans carry interest rates and need to be paid down. Your strategy is determined in part by your funding options, so knowing what those are allows you to better plan your company's future in advance.

Expand, Don’t Contract

A source of temporary funding can help a business take advantage of opportunities that can have a devastating impact on its rivals. An industry slowdown can cause other companies to pull back and allow your business to make an aggressive move to fill the void – if you have the money to pull that off. This could be the chance to hire away key talent from your competition or lock in long-term deals at an advantageous price from suppliers. Temporary funding can be the linchpin of a contingency plan that involves expanding while others contract.